I/EC
Costs
Estimating Time of Construction In a highly competitive industry tardiness can result in a partial loss of market to the swifter competitor w h o reaches the customer first w i t h the product
by H. Carl Bauman, American
^ ^ F ALL the elements of the fixed capital cost estimate, figuring time is probably most important. Every day which can be saved in completing the project assures early return on the capital idling during the construction phase. For the chemical industry turnover ratio is approximately 1—a dollar of invested capital usually yields a dollar of annual sales. A delay of a month in bringing a $1 million plant on stream means a loss of about $90,000 of sales. Time enters all phases of the estimate. It becomes critical in the delivery of key pieces of equipment and materials. It is the significant variable in the calculation of labor costs and field expenses. Estimation of time must consider the perils of weather, labor availability and productivity, strikes, transportation delays, design, and construction errors. There is available in the literature much good data on manhours required to perform specific tasks. Most of it, however, represents average conditions for wide geographical areas and at best can be used as points of reference to be fitted to the particular project at hand. Local contractors can build up fairly accurate time records based on intimate knowledge of the labor market and special conditions in their areas of operation. Such information represents valuable "know-how" of the contractor who is understandably reluctant to divulge his data. Estimates of time of construction tend to be optimistic. A survey of a representative number of recently completed projects (Table I) showed that only 6% were completed ahead of schedule, 2 9 % were on
Cyanamid Co.
schedule or no more than 1 month late, 37% were up to 6 months behind schedule, and 2 8 % up to 12 months behind schedule. Interestingly enough, there appears to be a correlation between dollar value and complexity of the project with delay in completion. Completion of project is that time when the plant is first on stream producing 90% or more of capacity on a continuous basis. Physical construction prior to start-up operations is generally completed at or near the scheduled dale. Delays shown in Table I reflect largely the time required to correct errors, omissions, and equipment and material failures encountered in starting up the chemical process plant. (See I / E C 52, 51A, March 1960.) The actual construction cost during this period is negligible compared with the cost of lost production. In an attempt at determining realistic completion dates for plant construction projects, fixed capital cost of a number of recent projects were plotted against completion time in months (shown at right). The result is a pattern showing a correlation of project cost with time to complete. The study included a representative group of plants of the fluid, fluidsolid, solid, and civil-mechanical varieties. Capital costs varied from $0.1 million to $38 million. Plants costing less than $1 million took from 6 to 19 months to complete (Table II). Median time was 11 months. The range was 1 3 to 27 months for plants costing $1 million to $5 million with a median time of 19 months. It took a median of 27 months to complete plants over $5 million in value. Time ranged between 19 months for a single process
Table I. Survey of Recently Completed Projects Project Completion Time Ahead of schedule On schedule (no more than 1 mo. late) Up to 6 mos. behind schedule Up to 12 mos. behind schedule
Average Capital Value per Million S
Total Cases
0.7
6
2.0
29
2.3
37
11.0
28
%
C a p i t a l Costs vs. Completion Time
Points shown here w e r e d e v e l o p e d from 3 5 major projects. Apparent disparity in the lower r a n g e may b e due to difference in t y p e of construction contract VOL. 52, NO. 8
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COSTS CONSTRUCTION SCHEDULE
How is the constructruction schedule doingr This t y p e o f chart is inv a l u a b l e in keeping tabs on all phases o f the project. The chart is t y p i c a l o f those kept by major companies
PROGRESS CHART
H o w does t h e actual construction schedule c o m p a r e w i t h the estimate time of construction? A chart such as the one shown here will help in deciding when and where a more d e t a i l e d analysis of the many phases o f the 'construction is n e e d e d t o overcome time lags that have d e v e l o p e d since the project was started
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INDUSTRIAL AND ENGINEERING CHEMISTRY
COSTS Table II. V·ariations in C a p i t a l Costs and Completi ion Costs Time in Months Fixed Capital Value, Million $ C ompletion Median 11 1 and less 6-19 13-27 19 1 to 5 19-42 27 Over 5
fluid plant to 42 months for a complex chemical, fluid, and fluid-solid project. As might be expected civil- and solid-type plants were found to go on stream earlier than fluid and complex chemical projects of equal capital value. Projects contracted out for construction on a cost plus basis were completed in two to eight months longer than those of equal cost let on a lump sum basis. The incentive advantage in the lump sum type of competitive construction bid seems evident. Scheduling Construction
To assure that construction is completed in the shortest time possible it is imperative that the work be carefully scheduled as soon after project authorization as possible. The project control estimate conveys in essence a construction time schedule. Installation costs are based on the estimation of time in manhours to assemble the process plant. Other items of cost affected by time such as weather conditions, craft labor, travel, start-up and premium time are also incorporated in the estimate. A projected schedule of construction can be prepared from the control estimate by coordinating and synchronizing installation work units in a sequence in which experience dictates they will be performed. Logically, site and substructure work will start ahead of building and equipment erection. As a consequence, detailed engineering and drafting must be concentrated in these areas initially. Once "out of the ground," engineering work can be spread so that parallel designs proceed for all other phases of the work. Despite such planning, drawings invariably issue in a predictable order because of the dependence of certain designs on preceding work. For instance,
piping drawings cannot proceed until equipment layout has been substantially finalized. Electrical work is dependent on equipment layout and to a large measure on piping drawing completion to avoid physical conflicts of location of piping and conduits, lighting fixtures and sprinkler heads, controls, and valves. Flow of completed drawings and specifications proceeds generally as: Site work Substructures Equipment and building superstructures Piping Insulation Instrumentation Electrical This flow of information establishes construction time starts for each class of work. Progress will be concurrent in all areas as time elapses but starts will stagger depending on drawing release time. Having fixed the starting time for each category, actual duration of the patricular construction period is taken from the manhours allotted to that work in the control estimate. Replicas of typical estimate detail forms illustrating manhour allocations are shown and discussed in I / E C 51, 68A (July 1959). A typical construction schedule is shown on page 60 A. Estimated construction time for each work item is shown as a horizontal bar next to the work unit. Each bar represents a manhour total taken from the control estimate. A parallel bar differentiated in a suitable fashion from the estimated (hollow vs. solid, etc.) is employed to visualize periodically actual progress. Each work item is assigned a weighted average value which is a ratio of its estimated manhours to total job manhours. Over-all project progress is shown as a single bar representing expected job duration. Many graphic devices are employed to make the construction schedule a valuable cost control aid. For instance, the chart (top, page 60 A) shows expected completion percentages on the estimated (hollow) bar. The actual (solid) bar shows percentage completion only at the heavy vertical line which represents the current report period. If progress is ahead of schedule the actual bar extends beyond the cur-
rent d a t e . It falls short of the d a t e line if the work item is behind schedule. T h e c h a r t also shows by symbols indicated in the legend such information as the expected a n d actual dates of requisitions, purchase orders, and material delivery. T h e detailed construction schedule is the basis for the p r e p a r a t i o n of a cumulative construction chart used to show j o b progress at a glance. Such a c h a r t is illustrated on p a g e 60 A and takes the shape of an ogee or S curve. Progress is shown by the dotted curves of actual completion c o m p a r e d with the solid lines representing estimated performance. T h e horizontal distance between estim a t e d a n d actual curves, to the time scale shown at the b o t t o m of the chart, reveals how far the j o b is behind or a h e a d of schedule at the report date. As the construction schedule is always based on the j o b estimate, it should be revised only when the estimate is changed to reflect additional work of any kind not originally contemplated. T h e schedule is not changed, however, if actual j o b progress proves the estimate to h a v e been in error. A device used to help control costs, the schedule must be thought of as a means of pinpointing d e p a r t u r e s from expected progress so t h a t a d e q u a t e steps can be taken in time to keep within the forecast. Often a low estimate has been kept within b o u n d s despite a slipping schedule by extraordinary but timely measures taken in re-engineering or reappraising construction techniques. A very safe schedule based on an overestimate is an invitation to overspend on the project. Early indications that progress is better t h a n scheduled should be taken as a cue to re-evaluate the estimate a n d reduce the predicted cost, if justified, to avoid a complacent attitude which could result in fixed capital cost greater t h a n need be.
Our authors like to hear from readers. If you have questions or comments, or both, send them via The Editor, l/EC, 1155 16th Street N.W., Washington 6, D.C. Letters will be forwarded and answered promptly. VOL. 52, NO. 8
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